Share Your Financials to Engage Employees

If you’re searching for ways to improve employee engagement, you’ll find lots of laundry lists. Fourteen tips. Seven steps. The “Ten C’s.” Most of these sources contain good-but-basic advice, like providing mentoring, encouraging two-way communication, and recognizing people when they do great work.

But the statistics suggest that following such advice, like staying on a diet, is harder than it looks—some 70% of U.S. workers say they don’t feel engaged on the job, a number that hasn’t changed much in recent years. If time-starved owners or managers don’t naturally abide by all those nostrums, are they likely to start now?

We have a different way of thinking about engagement, because we have a different idea of what it is.

Our approach begins with a question: Who do you think is more engaged in the business, the farmer or the hired hand? The building contractor or the guy pounding nails? The store owner or the clerk behind the counter? The answers are obvious, but they raise an equally obvious objection. Not everyone can be an owner. And as a National Bureau of Economic Research study shows, even employees who hold an ownership stake in their employer aren’t necessarily more engaged or motivated than their nonshareholding peers.

But the objection misses the essence of ownership. It isn’t just that owners are in charge. It’s that they’re players. They’re in the game. They know the rules. They act, and they watch the numbers to find out whether their actions were on track or misguided. If they win the game, they know there’ll be a payoff. Most people think of engagement in individual terms—feeling fulfilled by the task at hand, wanting to do a good job. We see engagement as being part of a team that’s competing to win.

It’s surprisingly easy to generate this kind of engagement among employees when you make the economics of the business come alive by sharing some key financial numbers. It’s an open-book approach: people begin to watch these indicators. Then they figure out how to move them in the right direction.

A while ago, for instance, a global travel-management company picked three representative U.S. branches to pilot open-book methods of building engagement and improving performance. The company’s team identified a critical financial number—site revenue minus direct site costs, known as direct profitability. Branch employees then began meeting every week to review these financial results, brainstorm ideas for improvement, and forecast future results.

In the past, the company’s front-line travel counselors had behaved pretty much like employees everywhere. They did a competent job, but they didn’t worry about the financial implications of a changed itinerary or a new hotel pricing policy. Now—engaged in the business of improving their branch’s numbers—they began spotting opportunities an owner might think of. A customer-relations rep in St. Louis, for instance, contacted vendors to recover money lost due to hotel no-shows and canceled flights. Over the first few months she collected $189,093—a significant savings for the company.

Each pilot branch generated several such ideas, which they then shared with the other two. At the end of the pilot period, the experimental branches had exceeded their profit budgets by 10%, 17%, and 20%, resulting in more than $1.7 million in incremental earnings. None of the other U.S. branches hit budget that year.

We’ve witnessed similar results at many other companies that follow the open-book path to engagement. A designer at a D.C.-area design/build firm says she notices “everyone caring more and being more accountable and taking responsibility.” The CEO of a midsized manufacturing company told us, “I don’t have employees in my plant anymore. I have entrepreneurs who are looking to find ways to make more money.” At one company, employees even organized small betting pools around the accuracy of each month’s profit forecast. (Now that’s engagement.)

Most open-book companies tie incentive compensation to improvement in the key financial numbers, so employees see a payoff as well. But the real engagement comes from thinking and acting like owners.

Bill Fotsch, founder of Open-Book Coaching, has helped more than 300 companies around the world learn the principles and practices of open-book management.

John Case is the author of numerous articles and books on business and economics, including Open-Book Management and (with Corey Rosen and Martin Staubus) Equity. He recently joined the board of the NCEO.